Oldtent Archives 2007 - 2008

I gather you expect we will run soon, correct and then fly; the parabola. Do you see the correction as playable?  Will we get a chance to lighten up and then reload or might we see a really short V bottom/rebound with nary a chance to catch it? It occurs to me that during this correcton might be the last chance in a while to get more physical while it may be on sale.

If we were to sell half before correction, buy some more fizz at the low when somebody rings the bell (ya sure) as well as buy back most of the shares….we get to have our cake and eat it too.  Dreaming…….

….You shoulda seen the action in 1998…..Boring….but i am thick skinned….and I do believe in the Gold Story….and Phys is up 400% from the ugly double bottom in 99 and 01….and our Majors are up 1200% (some of them )…and many juniors have had good runs off and on..and they will run again…and yes they suck big time right now…but…

..No Regrets…

….they dont have to….you are doing a great job of it for them !!

He has been saying those last three or four paragraphs for ten years or so now, such that you’d have to be pretty thick skinned to keep on believing whilst your portfolio is being crushed.  And if you had been a subscriber (and still believe) for ten years, you will already know what will be in this year’s issues, so why pay $199 anyway?  It isn’t all Bill’s fault:  I was reading another article saying that future generations will marvel at how long the fundamentals were appalling before they finally collapsed, and how nobody saw it coming.  Well, Bill and many of us saw it coming ten, fifteen years ago, but because the bar stewards managed to keep the party going with cheap money, cheap talk and cheap promises, nobody believes us anymore when we tell them about the hangover coming up.

Something very unusual is going on out there. I have related that the Café Sentiment Indicator has fallen off a cliff … for 9 days now. Never seen anything like it in 10 years, meaning it would be lousy even if gold had been getting trashed. For it to collapse when gold has rallied more than $100 of late was unthinkable.

Part of that indicator is paying customers, which are off 75% during that period of time. Each day I think is a fluke, which can happen, and that the subscribership will rebound sharply the next day, but it hasn’t.

What is going on?

Two things…

1. The investing public, and followers of this column, have been brutalized by their junior/exploration gold/silver shares. There is talk about whether the US economy will go into a depression. In our sector we are already in one.

People can’t take it anymore and are selling out their positions and walking away. They don’t want to hear about these stocks anymore and don’t want to read about gold, silver and the shares any longer. They are throwing in the towel.

2. The horrendous shape of the US economy, and in other countries, has individuals pulling back from all kinds of discretionary spending, including paying a modest $199 for this service.

For the first time ever I had two veteran Café members write in the same week saying due to “economic conditions,” they were not going to renew. One was so concerned, he wanted to make sure he wasn’t automatically renewed, which we don’t do.

This is not for crybaby purposes, but to tell it the way I see it. It tells me that the economy is MUCH worse than reported by the US government and the average Joe and Jane are really feeling the pinch. They are hitting the wall and are likely to keep doing so for the foreseeable future.

It also makes me feel sad for a number of veteran Café members. Whatever the reason, the move down in the smaller gold/silver shares is off the charts from a standard deviation standpoint. Yet, what a mistake to get out here, or walk away from the one sector which is going to make people fortunes in the years to come. Think of it like a share slingshot which keeps getting drawn back further and further and further. When that shares slingshot is let loose, it will catapult the shares to unimaginable heights due to the force and pressure which have been built up over a long period of time.

The general public is going to come our way big time. As unthinkable as that seems at the moment, they will. You can take that one to the bank. It will send many of our shares parabolic. As I have stated before, much of the money will be made by momentum investors who jump on board when the action starts. Ironically, many veteran gold/silver share investors will miss the boat.

Those walking away from the likes of an ECU Silver, and so many other quality gold/silver companies, are making a grave mistake.

……Bill….come on and visit us at Goldtent….we do not Quit !

Hoping what you are feeling on the pulse of gold bears out to be true, charts or not.

Just watched Butch Cassidy and the Sundance Kid with Winedoc Jr.  He’s 12 and we love watching old movies together.

Winedoc

He calls velocity a “useless monetary concept”, a dangerous and meaningless concept, but he doesn’t explain why it wouldn’t cause inflation if it increased while the money supply remained constant.  That is because it clearly would cause inflation.

Consider a stable economy, with a velocity of four weeks/dollar, that is, each dollar changes hands, on average, once every four weeks.  Now, without any increase in production, people start spending their dollars every two weeks.  Demand for goods and services has doubled, but availability remains constant.  The price of the goods and services will rise. 

Certainly, the reason why velocity changes would be of interest, as would why the demand for money is falling, but that doesn’t get away from the fact that a change in the velocity of money will cause a change in the level of prices.

Look at it this way.  Suppose the money supply is increased by $1tn.  And suppose that this $1tn actually gets into the pockets of the 333m Americans who, on receipt of their $3,000 each in a remarkable turn-around of collective psychology decide to save it instead of spend it.  To avoid complications of effects on intrest rates etc., let’s assume they are all worried about the safety of the banks, so they all stuff the $3,000 under the mattress.  This extra money that has been created is not going to cause any inflation because its velocity is zero.  Money creation by central banks is not, of itself, inflationary.  To say that the concept of money velocity is useless, or dangerous, or meaningless is very strange.  Money supply and velocity are intertwined when discussing ‘flations.

US treasuries are in a similar situation.  The Chinese hold about $1tn in USTs, I understand, and there is concern over what they would do with them.  They are not trading them, so their velocity is zero.  They are out of circulation, just as the $3,000’s are in the example above.  One worry is that they will be tempted to sell them because of the declining dollar, causing the price of USTs to fall and interest rates to rise in the US. As soon as the velocity of these assets starts to increase, their value will fall.

And the “math” in your e-mail is an insult to the term “math”, but then it did come from a Professor of Economics!

I’m trying to recall what this situation ‘feels’ like.  Once you’ve been in the gold market awhile, things seem to sort of repeat, like variations on a tune you know well.

This reminds me most, right not, of the Oil run up when Katrina hit in 2005 late Aug/Sept.  I remember watching oil go sky high, and gold didn’t really follow.  And the oil/gold ratio hit an exteme low.

Then, of course, gold did follow. And broke $500, but the gold stocks didn’t move.  And those who follow the Gold/xau ratio said to sell gold.

Finally, in the first week of Dec., the gold stocks began their move, then waited, then moved with gusto into Jan, and finally topped out in May, if I recall.

It sort of feels like that a bit now.  With oil hitting highs and gold not really following all that well, and the stocks, esp. the Juniors, acting poorly.

So I expect a big move in Gold, then I expect the stocks to follow.

BUT, I think we’re going to have a three year move in the stocks, like in 2000 to 2003 Dec.  And I think we’ve just started the first move.

I don’t have any charts to show, any lines to draw.  It just feels the same to me, esp. those undervalued Juniors.

I think we’re going to see a three year period, starting from the recent bottom, that will take the HUI up at least 500% and maybe much higher.

Does it feel like this to anyone else?

Old Lurker

No reason to sit still and take unnecessary chances on a bank when there is no way to know their real financial condition. If anyone withdraws substantial cash you are automatically on their watch list. The problem could come when the cash is later re-deposited and you should be prepared to show where you got it and it is a re-deposit of cash you have already paid taxes on. The new money laundrying laws have teeth that even fully can’t get rid of! Be forewarned.
(soee your 16:550) You will find j6p does not have any accounts over the insured limits.
Of coarse you are right - he can’t wait even a few days or weeks for his money.

Bernanke goes to the hill today,
to have his time and have his say.
“What will I tell them when they ask,
why I wear this fearful mask?

What will I tell them when they say,
inflation is nowhere near at bay?
If I raise, the economy sinks,
If I lower, the gas price stinks.

I feel like a man upon a cross,
my lectern and my dignity lost.
What is this weight I must bear,
what is this outcome I must fear?

I know the dollar is going down,
if I don’t help, it will drown.
If I call Paulie he will sneer,
that all great men should not fear.

But I have seen him sweat and twitch
he knows we’re headed for the ditch.
The other day he bought GOLD,
just in case his positions fold.

He had a grin that made me sick,
he plays this market like a trick.
And I, I toss and turn at night,
I’ve been more wrong than I’ve been right.

My hair, you see, is like the grave,
here I stand in the land of the brave.
I must defend what I know is wrong,
I have no end to this woeful song.”

Great article by Schoon.  Thanks.